Micron’s shares are up 48% year to date.
Micron’s shares were up more than 3% on Monday, largely thanks to an upgrade by Goldman Sachs. Analyst Mark Delaney upgraded the company to buy from neutral and raised the company’s one-year price target from $40 to $56.
Micron is one of the largest U.S. producers of DRAM and NAND memory chips. Analysts have been strongly divided on the future of chip stocks, and Micron experienced a brief downturn during the height of theU.S.-China trade war.
And there’s no straightforward answer when it comes to Micron. The company has many potential tailwinds and headwinds that could affect it in the coming years. Here are a few things that could affect Micron going forward.
Tensions Have Eased Between the U.S. and China
Micron’s shares struggled during the height of the trade war between the U.S. and China, given that half of Micron’s sales come from China. And the brief ban on the Chinese company Huawei caused some uncertainty since the company accounts for 17% of Micron’s revenue.
Micron’s shares rebounded over the past month, largely thanks to eased trade-war tensions. However, China still poses a large risk to Micron since trade relations could change very quickly.
Micron Delivered a Strong Earnings Report
Toward the end of June, Micron delivered a better-than-expected earnings report. Investors didn’t expect much from the company at that point, and the company’s stock surged 10%.
Demand for DRAM and NAND Memory Chips Should Increase
One thing the earnings report revealed was an increased demand for both DRAM and NAND memory chips. According to Goldman Sachs, the company’s business is made up of about 70% DRAM and 30% NAND.
DRAM prices have unexpectedly spiked in recent weeks due to a trade dispute between South Korea and Japan. This affected the global supply of DRAM and benefited Micron’s bottom line.
Delaney said his outlook on the global demand for memory is more positive and that any excess inventory will be reduced faster than expected. The analyst believes Micron will remain profitable during the current chip downturn.
